World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Monday, June 29, 2009

I’m back and I’m *almost* completely situated in the new house – moving is so much fun! (not)

I spent quite a bit of time catching up with the charts and such and have quite a few I’d like to show, but will only present a few key ones. Let’s start with the overnight action in the /YM and /ES where prices fell yesterday evening but have now gone into positive territory:

There is no significant economic data out today, just the usual plethora of bond and treasury auctions. This week the markets are closed on Friday in honor of the 4th of July which is on Saturday. That would be a most outstanding opportunity for the leaders of this country to really think about what the heck it is they’re doing and what type of country it is that our founders set out to build. FREEDOM IS SECURITY. If any of them wake up from their fiat induced stupor and grow a set, their first action would be to remove the central bankers, get rid of the Fed, and create a Constitutional Amendment that separates the Corporations and their money from State.

Now, let’s look at the big picture on this Alice in Wonderland Economic Mass Psychosis Greenshoot rally… In the chart below is the SPY over the past 6 months. Note the volume/price pattern – I’ve pointed out before that as we went into the March lows volume was very heavy and with the rally the volume trend has been working its way lower. That is still true. At some point the volume is going to just not be enough to sustain higher prices and that time may either be now or it may be as we get into the fall. I don’t know for certain which, so I’ll let key levels on the tape “talk to me.”

The next longer term chart to look at is the VIX. We see a large descending wedge that broke higher but has now collapsed back to the top descending trendline. That move over the past few days was anything but bearish… but keep a sharp eye on this chart as a bounce off the top of that trendline could mean that it simply retested the break and then is going to make its real move. Again, let the tape tell you what’s happening, but that would be my guess:

Keep in mind the P&F Chart of the Dollar. It has a target of 71 and thus has overhead resistance. It has been weak and that has kept equity prices elevated. At some point it wont, but that’s a part of the Economic Mass Psychosis. Note that although this dollar chart has a lower target, the charts of the DOW, S&P, and Transports have bearish targets still:

Getting to the shorter term daily charts, the DOW has an interesting hammer that was made on Friday on higher volume. That portends lower prices if confirmed by today’s action. Last Thursday’s rocket shot was a near perfect 50% retrace and that hammer couldn’t even make it there. The short term stochastics are setting up for lower and the weekly’s are on fresh sell signals as well:

I’ll note that the same volume on Friday was actually lower, not higher, on the DIA and SPY which confuses the short term volume picture.

Otherwise all the major indices are dancing around the confluence of the 50 and 200dma’s. I see the 903 level as support right now while the 930 level would be resistance at the 61.8% retrace level.

The move up from the recent June 23rd low produced 4 clean waves and we may have just experienced a 5th wave failure. Here’s a 30 minute chart showing the latest upchannel… we are poking beneath it now, but the bottom may be a little lower than I have drawn. A break below the 912 pivot would be bearish and then the 903 level would be next, however I will not be frontrunning anything until that channel breaks decisively:

Note on the chart above that while prices just double topped, both the stochastics and RSI produced lower peaks – that is a short term negative divergence.

Again, I am not playing a lot in here. This is not the season for all out collapses and while it could happen in here, the odds are not for it from that perspective. There’s a lot of data later in the week, consumer sentiment tomorrow (expectations/hopes are getting set higher), and then the employment situation comes out on Thursday. Should be a thriller: